GoU owed USD 4M by Private Railway Firm
Discussed in the Committee on Commissions, Statutory Authorities and State Entreprises on August 30th, 2016
The Rift Valley Railways (RVR) which was cleared to manage the parastatal railways of Kenya and Uganda has defaulted Uganda Railways Corporation billions of shillings. This was revealed by Charles Kateeba, the Executive director of Uganda Railways Corporation during a meeting with the parliamentary committee on Statutory Commissions and State Enterprises chaired by Abdu Katuntu, Bugweri County Member of Parliament.
The corporation appeared before the committee to respond to queries raised by the Auditor General in his report of on various public corporations to Parliament which is currently being considered in the committee.
In 2006, Government of Uganda entered into a concessional agreement with RVR for 25 years. In the terms of the agreement, RVR is to declare the revenue/income earned every month to URC upon which 11.1% of the income accrued is to be paid to URC.
However, from 2006 to date, RVR has defaulted URC about USD 4,013,000. This is in addition to not meeting other obligations like the failure to maintain the corporation’s assets to the agreed standard
In the 2015 report, the Auditor General also noted that although Section K.1 (3) and K.2 of the agreement empowers URC to perform independent audits of concessionaire (RVR) to establish and confirm Gross revenue earned by RVR from which the 11.1% concession fees are computed. URC has been relying on concession income computations made by RVR as a basis to raise invoices which poses a risk of under declaration of concession income by the Concessionaire (RVR) thus loss of revenue to the Corporation.
While appearing before the committee, URC’s Board Chairperson, Hannington Karuhanga explained that they are going to institute an audit to find out the total income which RVR has gained from its operations since 2006.
Members of parliament expressed displeasure over the poor performance of the railway business in Uganda even after government entering into an agreement with a private company.
One of the members told the officials from URC “You donated our equipment to RVR. I have been around Kampala but have not seen these wagons. RVR is using them for private business”. The Executive Director disagreed with “we conceded all our assets to RVR for doing business. It operates between Kenya and Uganda, By not seeing them in Kampala doesn’t mean they are not around. They are supposed to use them as they wish provided they provided income”
Committee Chairperson, Katuntu described the concession between government and RVR as no longer a viable business. “This is not a marriage to talk about. It has a unretrievably broken down. There is no dividend. It is a raw deal to Ugandans. We are dealing with street people, he told the committee. The Executive Director confirmed the chairperson’s assertions “We were doing better in 2003 and 2005 as opposed to 2016”.
However, one of the officials from URC explained that much as URC is required to oversee the operations of the railway business. It is not a signatory to the agreement. The signatories are the government of Uganda and RVR. And that URC cannot issue a notice of default to RVR but it supposed to be done by the Government of Uganda and Kenya.
But still incensed with the poor performance of the agreement, the committee chairperson asked the URC officials “Have the assets been maintained to your satisfaction? Are you giving them the chance to depreciate more? Have the railway business improved in this country?” still, the answers were in the negative.
The Board Chairperson explained “We are just 9 months into the job. We are the first board to raise notice of default. I have been to the Minister of Finance three times raising the issue of default”
The Executive Director asked the chairperson to let the media out of the meeting for him to provide more information which he could not do in the presence of the cameras. And the chairperson agreed. But before that, the committee had resolved to summon the Permanent Secretary for Ministry of Finance and RVR officials to respond to the matter.